kontinuita - Komunálna Poisťovňa

NOTES TO
THE FINANCIAL
STATEMENTS
(ii) Estimate of future insurance benefits arising from
long-term insurance contracts
The amount of liabilities arising from long-term insurance
contracts depends on estimates the Company
makes regarding the expected number of deaths in
every year in which the Company is exposed to the insurance
risk. These estimates are based on standard
mortality tables that reflect the latest historical mortality
experience, adjusted, if necessary, for the Company’s
own experience. The main sources of
uncertainty include epidemics (such as AIDS or SARS),
extensive lifestyle changes (such as nourishment
changes or smoking), which could result in future mortality
being significantly worse than in the past for age
groups in which the Company is exposed to significant
risk that a client will die. On the other hand, ongoing
improvements in medical care and social conditions
may result in prolonging the life of Company’s clients
compared to the expected life which the Company
takes into consideration when making its estimates of
liabilities and future insurance benefits from insurance
contracts for reaching certain age. For insurance contracts
for reaching certain age, the expected mortality
improvements are appropriately factored in estimating
the amount of liabilities from long-term insurance
contracts.
If the numbers of deaths in future years were higher
or lower by 10% from the management’s estimate, the
ultimate liability would be higher or lower by SKK 6.5
million.
Investment income from the related financial assets is
another factor estimated within long-term insurance
contracts with guaranteed contractual terms. This estimate
is made based on the best current estimate of
the market income, taking into account the future economic
development. The Company estimates its actual
value at 4.23%.
If the average investment income were higher or lower
by 0.1% from the management’s estimate, the ultimate
liability would be higher or lower by SKK 36 million.
(iii) Impairment of securities available for sale
The Company concludes that securities available for
sale are impaired when there has been a significant or
long-term diminution in their fair value below their
cost. The assessment when a significant or long-term
diminution in the fair value occurred requires the use
of estimates. The Company assesses, among other
factors, the volatility in security prices, the financial
performance of companies, the industry and sector
performance, changes in technology, and operational
and financing cash flows. To consider impairment may
be appropriate when there is objective evidence that
the financial performance of companies or the industry
and sector performance have deteriorated, when
changes in technology occurred, and operational and
financing cash flows have worsened.
If the Company set up a valuation allowance for securities
available for sale that show a yearly diminution in
value posted to equity, such valuation allowance would
amount to SKK 68,654 thousand.
(iv) Current volatility on global financial markets
The ongoing global liquidity crisis which started in the
middle of 2007 has produced many results, including
lower funding of capital markets, reduced liquidity in the
Slovak banking sector and sometimes higher inter-banking
interest rates, and a very high volatility in local and
international stock markets. Uncertainties in global financial
markets also led to the collapse of banks and
subsequent interventions aimed at remedying banks in
the United States and Western Europe. To predict the
total impact of the ongoing financial crisis and to protect
companies against it appears impossible.
KONTINUITA ANNUAL REPORT 121